Aim is to reduce the Ansett drag on Air New Zealand managers

Friday 2nd March 2001

GARY TOOMEY: Imports new senior manager and titles

By Graeme Kennedy

Rebuilding Ansett Australia is critical to restoring the Air New Zealand-Ansett Group to profitability following its disappointing first-half result and potential further bad news.

While chairman Sir Selwyn Cushing says 100% ownership of the Australian carrier is in Air New Zealand's long-term interests, Ansett's poor performance during the period was a major factor in dragging the group's first consolidated result down to a profit of just $3.8 million. Alone, Air New Zealand made $127.2 million in the previous first half.

The highest fuel prices for 10 years, all-time low New Zealand and Australian exchange rates against the US dollar and increased competition in the Australian market with the entry of low-cost carriers Virgin Blue and Impulse also contributed to one of the most difficult trading periods ever experienced.

Qantas was also hit by the same adverse factors, although not to the same degree. The carrier reported a first-half profit fall of 22% to $A262.9 million and will slash up to 1500 jobs and unprofitable international routes including China and Canada to cut costs.

The Australian carrier is also considering starting a low-cost Asian regional airline to service ports it has dropped for economic reasons in the past five or six years.

But Ansett is Air New Zealand's biggest problem, particularly as integration of the two companies has been slower than expected and without the hoped-for cost savings single group operations should bring.

Singapore Airlines is working with Air New Zealand and Ansett to explore areas of possible co-operation including aircraft, product and networks which should also bring increased savings and efficiencies.

New president and chief executive Gary Toomey said many strategies had already been begun to improve Ansett's performance, including raising customer confidence in safety and reliability following a series of inspection problems with its Boeing 767s which caused widespread disruption during the busy Christmas period.

Mr Toomey said Ansett's seven 767s were now fully compliant with Australian civil aviation authority regulations and a full audit of procedures had begun.

He said Ansett's deteriorating market share since the entry of Virgin Blue and Impulse into the domestic market and capacity deficiencies were being reviewed while the carrier was focusing on punctuality and targeting sales growth through travel agents and higher-yield corporate business.

Domestic trunk and regional networks were also under review as the company waited for regulatory approval of its planned purchase of regional carrier Hazelton, of which it now had acceptances for 78.5% of shares.

A cost-cutting voluntary severance programme was getting a good response, he said, although no details of how many jobs would go could yet be revealed.

Ansett was building a new accounting and management reporting system to provide better information on which to make decisions and fleet replacement and rationalisation were being planned.

Mr Toomey said the group had begun preliminary discussions with both Boeing and Airbus on new aircraft acquisitions - particularly for Ansett's long-overdue re-fleeting - with a replacement programme likely to be announced later this year. Service levels in the air and on the ground would be raised and standardised, based on those of 25%-owner Singapore Airlines

Group strategies, he said, included an overall profit enhancement programme, better brand positioning and gaining more benefits from alliances.

Performance would be improved by a new senior management structure with an integrated group of functional divisions to replace the previous separate and self-contained business units to streamline decision-making and reduce duplication, he said.

Changes include the departure of Air New Zealand International general manager Grant Lilly, who leaves his top job after 30 years with the airline. He follows chief financial officer John Dell, whose replacement is former Qantas finance executive Adam Moroney, general manager commercial Alister Paterson and Ansett International general manager Gary Kingshott. Operation services general manager Ian Diamond will retire.

Mr Toomey, who was Qantas chief financial officer, said a new sales and distribution group responsible for global activities would be headed by Ansett Australia general manager Andrew Miller, a former Air New Zealand domestic airline head, who would also become Ansett International CEO.

A customer service division to manage ground and air service standards would be run by customer operations and performance manager Lesley Grant while group general manager for operations (technical) Trevor Jensen would head a new operations division.

Another Qantas appointment to the group is the Australian carrier's New Zealand regional general manager Paul Donovan, who will head New Zealand and South Pacific sales and distribution operations.

All new appointments will now carry American-style presidential titles. Mr Toomey becomes president and CEO while other senior management are senior vice-presidents or vice-presidents.

Sir Selwyn said the move was in line with international business as most carriers, including Singapore Airlines, used the American terms. "A managing director here is the top man but in the US he is about four down," he said.

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